[DongleDongle] "Kiosks also ask for tips"… Angry Americans close their wallets

US Workers' Tip Income Drops 7%
Kiosks Also Demand 25% Tips
Calls for Minimum Wage Reform
Chicago Revises Tip Worker Wage System

This year in the United States, excessive tipping demands by employees have emerged as a social issue. Typically, in the U.S., there is an established culture where customers pay about 15% of the meal cost as a tip to show appreciation. However, recently, cases where employees request tips up to 45% of the food price have increased, sparking outrage among many Americans. The tipping amounts have been soaring like inflation, leading to the coining of the new term "tip inflation."

Some stores have drawn criticism for demanding tips in unreasonable ways. While some stores display tip request messages on kiosks introduced to save labor costs, others have appeared that leave a 20% tip on the self-checkout counter for customers to pay.

Angered Americans have finally started to resist paying tips. Today, we will look into the recent changes surrounding tipping in the U.S.

A message window asking whether to pay a tip is displayed on the kiosk screen.
[Photo by AP News]

U.S.: Tip Workers’ Tip Income Declines Year-over-Year... Consumer Fatigue Deepens

Gusto, a U.S. payroll software company, revealed last month that service workers in the U.S. earned an average of $1.28 per hour in tips, based on a survey of 300,000 service-related businesses. This represents a 7% decrease compared to the same month last year ($1.38).

[Image source=Getty Images]

The Wall Street Journal (WSJ) reported this news, explaining that a so-called "tip backlash" phenomenon is emerging in the U.S., where customers are reluctant to pay tips.

In fact, according to a survey conducted by financial information company Bankrate in June, two out of three Americans hold negative views toward tipping culture. Thirty percent of all respondents said that the U.S. tipping culture has become uncontrollable.

The reason customers are closing their wallets is analyzed to be the excessive increase in the number of times stores request tips since the pandemic. According to WSJ, the percentage of service-related businesses asking customers for tips at the checkout rose from 6% in 2019 to 16% this year.

Restaurants have also increased customer fatigue by aggressively demanding high tips through kiosks introduced during COVID-19. Typically, just before payment, the kiosk screen displays an option window asking if the customer would like to pay a tip of about 15% or, in some cases, as much as 35% of the payment amount. Americans have traditionally tipped about 15% of the food price to employees, and this culture has been introduced to kiosks as well.

However, customers find it difficult to accept why they should pay tips even for contactless services. Some stores have even set kiosks to automatically include tips during payment without asking customers, which has sparked anger among Americans.

The amount of tips employees demand has also noticeably increased. In large cities like New York, known for high prices, cases demanding tips of 45% of the food price have increased, leading to new terms such as "tip creep" and "tip fatigue."

Chicago Reforms Minimum Wage System for Tip Workers... Prevents Income Compensation Through Tips

As excessive tipping demands became a social problem, administrative authorities also took action. In June, the Chicago City Council amended the law to apply the same minimum wage standards to tip workers as to regular workers.

[Image source=Bloomberg]

In this situation, Chicago’s mandatory application of the legal minimum wage to tip workers can be seen as providing a foundation for workers to sustain their livelihoods without relying on tips. If the minimum wage is enforced, a culture where customers do not have to pay tips can be established.

Currently, in 42 out of 50 U.S. states, excluding 8 states, employers are not legally required to pay tip-receiving workers a base wage equal to the legal minimum wage. This is because workers can earn income above the legal minimum wage through tips. If the sum of tips and base wage falls short of the minimum wage, employers must compensate the difference, but in practice, this is rarely enforced. Essentially, the legal minimum wage system is not mandatory for tip workers. Therefore, workers have no choice but to rely on tips to make a living.

As Chicago, one of the three major U.S. cities, introduced such legislation, the service industry is closely watching whether this trend of legal reform will spread to other states. The nonprofit organization "One Fair Wage," which advocates for improving service workers’ wages, is urging 25 states to reform the minimum wage system for tip workers. The restaurant industry is strongly opposing this, arguing that if the minimum wage system is abolished, labor costs could increase by more than half compared to before.

Recently, South Korea has also seen some controversy as a few stores introduced the U.S. tipping culture. Some stores have tip boxes placed at the checkout counter, and the taxi-hailing platform KakaoT piloted a service allowing customers to tip taxi drivers, which sparked backlash from customers. There are concerns that tipping in Korea might become an obligation for customers rather than a gesture of gratitude for service.